[Click eStock] "Jeju Air Benefits from COVID-19 Endemic... Alleviates Concerns over Capital Increase with Perpetual Bond Issuance"

[Asia Economy Reporter Kwon Jae-hee] On the 30th, SK Securities maintained its 'Buy' rating and target price of 26,000 KRW for Jeju Air. This is due to the expected benefits for low-cost carriers (LCCs), whose passenger business accounts for an overwhelmingly high proportion, as COVID-19 becomes endemic.

SK Securities forecasted that in the endemic phase, LCCs will benefit more than traditional full-service carriers (FSCs). While passenger business contraction forced LCCs to endure a somewhat bleak period, FSCs actually made profits as their cargo divisions performed well, significantly increasing cargo margins. However, conversely, in the endemic phase, as passenger business recovers, FSCs' cargo business may shrink.

Researcher Yoo Seung-woo of SK Securities stated, "LCCs like Jeju Air, which can be regarded as pure passenger operators, will fully benefit in the endemic phase."

Additionally, the issuance of perpetual bonds, which dispelled concerns over a rights offering, is also considered positive news. Jeju Air recently decided to issue 79 billion KRW worth of perpetual bonds. This is a somewhat reduced issuance compared to the previously discussed level of about 150 billion KRW. However, since the interest rate can escalate up to 12.4% after one year according to the escalation clause, this reduction is positively evaluated as it may lessen the burden on interest expenses.

Researcher Yoo analyzed, "The issuance of perpetual bonds by Jeju Air has dispelled the continuously emerging possibility of a rights offering," adding, "With the lifting of entry restrictions for foreigners visiting Japan for tourism purposes from June 10 and the visible turnaround in international passenger traffic, the positive factor is that uncertainties related to capital expansion possibilities have somewhat been resolved."

This content was produced with the assistance of AI translation services.